Travel Expense- Deductibility of a Companion's Travel Cost

INCOME TAX – DEDUCTIBILITY OF A COMPANION’S TRAVEL EXPENSES a detailed analysis of the travel expense deduction is discussed in the IRD guidelines. Case 16 and Case K75 both concern the deductibility of a companion’s overseas travel expenses. Basically, the key point is:

1. In most cases, the companion’s travel expenses will not be deductible.
   
   
2. If the companion is accompanying the taxpayer simply for companionship or to attend social functions, then this expenditure will not have a sufficient nexus with the taxpayer’s business or income-earning activity.
   
   
3. However, a deduction may be permitted where the companion supports the taxpayer, to a reasonably substantial degree, in the business being undertaken. The companion does not need to be an expert in the affairs of the business, but they do need some knowledge of the business being undertaken or they must possess some special skill or expertise to be able to provide support in a material way. If these qualities are present, then the Commissioner considers a sufficient nexus will exist between the companion’s travel expenses and the taxpayer’s business or income-earning activity.

*The above article is a high-level explanation of the methods of calculation, and there may be other technicalities/rules that are applicable. The complexity of the calculations can also vary. Please reach out to us if you have specific questions regarding your situation.

Please note that the above does not constitute specific tax advice and only intends to be a general advice. If you require specific advice related to your situation, please reach out to our tax consultant using the ‘contact us’ option.

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